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The administrative burden of implementing municipal financial management regulation: a case study of five compliant south african municipalities

To deal with the financial dysfunction of municipalities – and indeed the outright fraud and corruption, responses from national government regulators over the last two decades have included increasing the intensity and scope of audits (e.g. in high risk areas such as supply chain management), proliferation of oversight structures (such as audit committees and Municipal Accounts Committees) with independent specialists represented on them, and promotion of Generally recognised Accounting Practice (GRAP) standards. Serially non-compliant municipalities which simply disregard the regulations with virtual impunity do not bear much of this administrative burden. But for the few municipalities aspiring to achieve or retain a financial unqualified or clean audit, these regulatory costs of compliance (both financial and non-pecuniary) can be substantial. There has however to date been little systematic research into this area in the South African context. This exploratory case study of five South African municipalities combines an analysis of the relevant legislative and regulatory frameworks and secondary financial information sources such as audit reports, with the analysis of qualitative data from interviews conducted with senior officials in the sampled municipalities. It focuses on the identifying the main financial governance costs drivers in municipalities, as well as the non-pecuniary opportunity costs of compliance (such as delayed service delivery or higher prices paid for items), and focusses two main compliance areas: the GRAP and MSCOA reforms. The choice of a municipal focus is appropriate given that national government’s views are well document in the regulations and supporting documents themselves, and generally in the public domain. Moreover, they are occupying a dominant vantage point vis-a-vis the local government sphere in terms of intergovernmental power dynamics. However, national government regulators like the National Treasury and the Department of Cooperative Governance and Traditional Affairs typically publish aggregated, high-level reports where the voices of individual municipalities are seldom featured. Given the unique dimensions of regulatory dimension in each municipality, and the immense variation in operational and financial contexts across the local government sphere, these voices have been under-researched.